What happened

Shares of meme stock favorite AMC Entertainment Holdings (NYSE:AMC) have been on the decline for the last month, dropping almost 40% in that time. The losses accelerated after shareholders failed to support a new capital raise proposed by the company. But the stock is bouncing back today, jumping 8% early in the session before settling with a gain of 6.8% as of 10:35 a.m. EDT.

So what

Today’s buying may be from investors focusing on some positive news related to the underlying business. Much of the stock’s volatility this year has been spurred by its meme status from the retail trading crowd on sites like Reddit. But at some point, investors need to watch the business itself, and the company announced an agreement yesterday to reopen two important theaters in the Los Angeles area.

Image source: Getty Images.

Now what

AMC has been riding its meme status to bring additional needed capital onto its balance sheet in recent months, as it waits for customers to gradually increase spending on entertainment. Last week, AMC announced a second consecutive post-reopening weekend attendance record at its theaters. Most of those more than 3 million global attendees were in U.S. theaters.

The opening of two more large theaters in the Los Angeles area is also an important step for the company. AMC CEO Adam Aron commented, “The Grove and The Americana at Brand theaters are among the most successful theaters in the greater Los Angeles area.”

The recovering underlying business is helping turn the stock around after the extended decline that was accelerated when the company tabled plans for a vote to add 25 million shares for a new capital raise. The retail shareholders that represent about 80% of company ownership were not supportive of adding more dilution. But investors are giving the stock a boost today as they hope the business itself is slowly beginning to turn around.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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